Bill Gross: No Fed Hikes for a While

Bond guru Bill Gross of Pimco says that the Federal Reserve will not “risk raising rates” until the U.S. has had a year-and-a-half of sustained economic growth, at a solid, four percent rate.

Consider this in light of the fact that he and his colleagues at the money management giant have long said that U.S. growth is about to engage in a long period of a “new normal” where growth rates are much lower, perhaps under 2 percent.

“Nominal GDP must show realistic signs of stabilizing near four percent before the Fed would be willing to risk raising rates. The current embedded cost of U.S. debt markets is close to six percent and nominal GDP must grow within reach of that level if policymakers are to avoid continuing debt deflation in corporate and household balance sheets,” writes Gross in his monthly economic forecast.

The U.S. economy will likely approach four percent nominal growth as early as 2009’s final quarter, says Gross. But, the ability to sustain those levels once inventory rebalancing and fiscal pump-priming effects wear off is “debatable,” he says.

Bond guru Bill Gross of Pimco says that the Federal Reserve will not “risk raising rates” until the U.S. has had a year-and-a-half of sustained economic growth, at a solid, four percent rate.Consider this in light of the fact that he and his colleagues at the money...